Shares of Sirius Satellite Radio Inc. , whose shares have doubled over the past month, on Wednesday fell 8 percent after a JPMorgan analyst said that a further rally would make the stock expensive relative to its growth potential.
"We believe Sirius is now much closer to reflecting the near-term rapid growth opportunity we foresee, prompting us to take profits," said Barton Crockett, an analyst at J.P. Morgan, who downgraded the stock to neutral from "overweight."
Shares of Sirius, the No. 2 U.S. satellite radio service, have soared in recent weeks after it lured ribald radio host Howard Stern from Viacom Inc and reunited him with their new chief executive officer Mel Karmazin, the former president of Viacom.
Karmazin, lauded on Wall Street as a gifted salesman, is a radio industry veteran, who left Viacom over differences with its CEO and chairman Sumner Redstone.
Backed by a radio industry pro, Sirius is making a run at larger rival XM Satellite Radio , with high hopes that top draw talent like Stern and a contract with the National Football League will help lift its fortunes.
JPMorgan expects Sirius to narrow the gap between it and XM. By 2010, J.P. Morgan said Sirius could have a 44 percent market share, up from an expected 24 percent at the end of this year.
Sirius expects to end 2004 with 1 million subscribers. XM expects to have 3.1 million subscribers at the end of 2004.
"We continue to see substantial opportunity in the satellite radio sector, but now believe the better risk/reward is at XM, which has more subs(cribers) and we believe a faster turn to free cash flow profits and a one-year technology lead," Crockett said in the note.
Sirius shares fell 54 cents to $6.17 on the Nasdaq in early trading.
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